Will a local court recognise concurrent foreign restructuring or insolvency proceedings over a local debtor? What is the process and test for achieving such recognition? Has the UNCITRAL Model Law on Cross Border Insolvency or the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments been adopted or is it under consideration in your country?
Restructuring & Insolvency (3rd edition)
The core of the UNCITRAL Model Law on Cross-Border Insolvency was incorporated into the BIA and the CCAA. To date however, Canada has not implemented into its laws any of the provisions of the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments and it remains unclear when or whether this will occur.
Canadian Courts are supportive of international cooperation and comity in the context of cross-border insolvency proceedings involving property situated in Canada or under Canadian jurisdiction but commenced elsewhere in the world. Hence, upon application, Canadian Courts will recognize foreign bankruptcy and insolvency proceedings if satisfied that:
i) the foreign proceeding is a judicial or administrative proceeding dealing with creditors’ collective interests under a law which provides for a foreign Court’s control or supervision of the property or affairs of a debtor for purposes of reorganization or liquidation; and
ii) the applicant is a “foreign representative” within the statutory definition, that is, a person or body, including one appointed on an interim basis, who is authorized, in the foreign proceeding, to administer the debtor’s property or affairs for purposes of reorganization or liquidation, or was appointed as the foreign representative of the debtor by the foreign Court.
If those conditions are met, the Court will issue an order recognizing the foreign proceeding as either a “foreign main proceeding” or a “foreign non-main proceeding”.
The recognized foreign proceeding will be a “foreign main proceeding” if it is ongoing in the jurisdiction where the debtor has the center of its main interests, which, in the absence of proof to the contrary, is the jurisdiction of, in the case of a corporation, its registered office, and, in the case of an individual, his or her ordinary place of residence. Any other recognized foreign proceeding will be recognized as a “foreign non-main proceeding”.
It is possible for a foreign representative to apply to the Canadian Court for the recognition of many foreign proceedings. For example, the Court could recognize a US proceeding as the “foreign main proceeding” in respect of a debtor, and Mexico, France and UK proceedings as “foreign non-main proceedings” in respect of the same debtor or group of companies.
If the foreign proceeding is recognized as a “foreign main proceeding”, the Canadian Court is statutorily obliged to make an order, subject to any terms and conditions it considers appropriate, staying proceedings against the debtor in Canada and prohibiting the debtor from selling its property located in Canada outside of the ordinary course of business. In the case of a “foreign non-main proceeding”, such an order is not mandatory, but rather left within the Canadian Court’s discretion.
In the context of both “foreign main proceedings” and “foreign non-main proceedings”, the Canadian Court retains wide discretion to make, on application by the foreign representative, “any order that it considers appropriate”, provided that it is necessary for the protection of the foreign debtor’s property or the interest of a creditor or creditors. This includes, among other things, the power to order and supervise the examination of witnesses and authorize the foreign representative to monitor the debtor company’s business and financial affairs in Canada for the purpose of reorganization. The Canadian Court also retains the discretion to refuse to do anything that would be contrary to Canadian public policy.
In most recognition proceedings commenced in Canada, the Court will also appoint an information officer (typically an accounting, or financial advisory firm) who will be mandated to keep the Canadian Court and the Canadian creditors informed of any substantial developments in the recognized foreign proceeding.
British Virgin Islands
Part XVIII of the IA adopts the UNCITRAL Model Law on Cross-Border Insolvency for recognising foreign office holders, and for giving and seeking assistance in insolvency proceedings; however, this Part has not been brought into force, and there are no indications that it will come into force in the near future. As such, there is no formal procedure by which foreign office-holders may seek recognition in the BVI courts and thereby be afforded the same powers as a locally appointed office-holder.
Part XIX of the IA does, however, provide a basic statutory framework for judicial assistance in insolvency proceedings. It allows foreign representatives in certain types of insolvency proceedings to apply to the BVI court for assistance. It also preserves the court’s common-law powers to provide aid in relation to foreign proceedings. The proceedings to which Part XIX applies are collective judicial or administrative proceedings in which the property and affairs of the debtor are subject to control or supervision by a foreign court taking place in designated territories. This definition is wide enough to encompass certain types of foreign restructuring procedures.
The BVI court, when faced with such an application, is required to do what will best ensure the economic and expeditious administration of the foreign proceedings, to the extent that this is consistent with certain guiding principles. Section 467 IA states that the orders that the court can make in aid of the foreign proceedings are wide, and include orders—
- restraining the commencement or continuation of proceedings against a debtor or in relation to the debtor’s property,
- restraining the creation, exercise or enforcement of any rights against the debtor’s property,
- requiring a person to deliver up the property of the company to the foreign representative,
- making any order or granting any relief the court considers appropriate to facilitate, approve or implement arrangements that will result in the coordination of BVI insolvency proceedings with foreign insolvency proceedings,
- appointing an interim receiver of any property of the debtor, and
- making such other order or granting such other relief as it considers appropriate.
The provisions appear to be wide enough for the BVI court not only to provide procedural assistance but also to apply substantive principles of BVI insolvency law, and the BVI court has discretion whether to apply the law of the BVI or the law applicable to the foreign proceedings.
It is important to note that the court will only be able to assist the foreign office holder under these statutory provisions if the proceedings are taking place in one of the following jurisdictions: Australia; Canada; Finland; Hong Kong; Japan; Jersey; New Zealand; the UK; and the USA. If the foreign office-holder was appointed in proceedings in a different jurisdiction, the support they may receive will be very limited, though they will be able to bring certain claims based on their title to assets contained in the insolvent estate (including causes of action), if they can evidence that sufficient title is vested in them.
The BVI courts have had a number of opportunities to consider the scope of Part XIX. In Irving H Picard v. Bernard L Madoff Investment Securities LLC BVIHCV 140 of 2010, unreported (2010), Mr Pickard, the trustee appointed in the US liquidation of Bernard L Madoff Investment Securities LLC, sought (1) recognition in the BVI as a foreign representative, (2) permission to apply to the BVI court for orders in aid of the foreign proceedings, and (3) permission to require any person to deliver up to him any property belonging to the company. Deciding the case against Mr Pickard, Bannister J held that foreign representatives are confined to relying upon Part XIX, because the legislature had decided not to bring the alternative provisions in Part XVIII into force. The key difference between the two Parts was that whereas Part XVIII conferred status on foreign representatives through recognition of the foreign proceedings, Part XIX merely gave the foreign representative express rights to apply to the court for orders in aid, but without conferring status. The codification of rules on recognition of foreign office holders in Part XVIII had resulted in the implied repeal of the common-law rules of recognition, so Mr Pickard could only rely on the support afforded by Part XIX. The court then held that because Part XIX operated on an ‘application-by-application’ basis it could not give Mr Pickard any general authority or special status, but would have to hear individual applications for specific orders.
In Re FuturesOne Diversified Fund SPC Ltd BVIHCM (COM) 113, 114, 115 and 116 of 2012, unreported (2013), the court had to consider the position of a receiver appointed by the United States District Court for the Northern District of Illinois on the application of the United States Commodity Futures Trading Commission. An application had been made by the joint liquidators of certain funds incorporated in the BVI for a declaration that they had been validly appointed. The receiver applied to be added to the proceedings, either under the court’s inherent jurisdiction or under Section 273 of the IA as a person ‘aggrieved by an act, omission or decision’ of a company liquidator so that he could oppose the liquidators’ application and seek orders reversing everything that had been done, on the basis that it was done to avoid the effect of the order by which the receiver had been appointed. He also sought an order under Section 467 of the IA in support of the Illinois proceedings staying the BVI liquidations.
This case was also heard by Bannister J. In relation to the latter application, his Lordship held that the ability to make orders in aid of foreign proceedings was limited to foreign proceedings for the purpose of ‘reorganisation, liquidation or bankruptcy’, and that on the evidence before the court it appeared that the purpose of the US receivership was to protect investors rather for any of the specified purposes. Accordingly, Bannister J held that the US-court-appointed receiver had no standing to make any application under Section 467 of the IA. In relation to the receiver’s application to reverse the acts of the liquidators, the court held that the liquidators’ claim that they had been appointed was not an ‘act, omission or decision’ of the joint liquidators within the meaning of the Act, so the receiver did not have standing under Section 273 of the IA. In any event, having concluded that the liquidators were validly appointed, the judge held that there was nothing that could have prejudiced the receiver.
The case of In the Matter of C (a bankrupt) concerned an application brought by trustees in bankruptcy who had been appointed under the laws of Hong Kong for recognition in the BVI of the Hong Kong proceedings and the trustees’ appointment. Bannister J reviewed his earlier decision in Pickard v. Bernard Madoff Investment Securities LLC (supra) and stated that Part XIX was not an exhaustive code in relation to the court’s jurisdiction to assist foreign insolvency officials: the effect of Section 470 of the IA was to preserve the common-law jurisdiction to assist foreign representatives as defined in Section 466 IA. (This Section requires that the foreign office holder be a person acting as an office holder in insolvency proceedings in a relevant foreign country designated as such by the Financial Services Commission of the BVI. If the jurisdiction in which the foreign office holder was appointed has not been designated by the FSC, Section 470 is of no assistance.
If a BVI company has been wound up or is in the process of being wound up by a foreign court, it can nevertheless be placed in liquidation in the BVI by either of the two routes available (i.e., the appointment of a liquidator by the court or by the members of a company). A foreign company that is in liquidation abroad may also be placed in liquidation in the BVI, but only through the mechanism of a court-appointed liquidator. In such situations, the liquidation of the company in its place of incorporation will generally be regarded as the primary liquidation and, in common-law countries at least, all others will be treated as ‘ancillary’ or secondary liquidations in which the liquidator’s powers will be confined to collecting and distributing the assets in that jurisdiction.
If a liquidator is appointed over a BVI company, he or she becomes the appropriate person to deal with the company’s assets in place of the directors. The liquidator will be recognised as having the authority to administer the assets of the company worldwide, but the recognition of his or her authority abroad is effectively a matter for the foreign courts in the relevant jurisdiction. Most common-law jurisdictions will generally recognise a liquidator of a foreign company appointed by the court of the place of incorporation.
Recently, the BVI has taken steps to promote the efficient management of cases involving concurrent insolvency or restructuring proceedings in multiple jurisdictions. In May 2017 the BVI Commercial Court formally adopted new guidelines for communication and cooperation between courts in cross-border insolvency matters. The initiative, which was the fruits of the Judicial Insolvency Network’s activities (the JIN), has proved very popular among offshore practitioners and judges alike. The membership continues to grow with Florida, Seoul and the Cayman Islands joining during 2018.
The guidelines are designed primarily to enhance communication between courts, insolvency representatives, and other parties as they deal with the challenges of global restructurings and insolvency. One of the key objectives is that with the increase in efficiency stakeholders will see a reduction in delay and cost.
The guidelines are intended to be flexible and subordinate to local laws and sovereignty; however, they reflect the view of the judiciary on the importance of coordination and cooperation in cross-border insolvency proceedings: for example, the first guideline encourages practitioners to communicate and cooperate with their foreign counterparts from the outset of proceedings.
Although the JIN guidelines may not end turf wars between appointees, they are likely to bring these disputes before the courts at an earlier stage, to open the debate to the relevant courts, and to promote collaboration rather than conflict, and these aspects alone may well promote a culture of cooperation that will benefit stakeholders in cross-border insolvency procedures.
The Cayman Islands has not adopted the UNCITRAL Model Law on Cross Border Insolvency, but it has enacted its own international cooperation legislation and also applies common law and comity principles in providing assistance to foreign insolvency proceedings.
Section 241 of the Companies Law allows "foreign representatives" (i.e. liquidators, trustees or other insolvency practitioners appointed over foreign companies and legal entities) to apply to the Cayman Court for orders ancillary to the foreign insolvency proceeding. The orders that may be granted include:
- recognizing the right of the foreign representative to act on behalf of the foreign debtor within the Cayman Islands;
- staying legal proceedings or the enforcement of judgments against the debtor;
- requiring persons with information relating to the business or affairs of the debtor to be examined and/or produce documents; and
- ordering the turnover of property to the foreign representative.
Section 241 of the Companies Law does not apply to foreign insolvency proceedings in respect of Cayman Islands companies, and therefore any recognition and assistance must be granted under common law principles. The circumstances in which the Cayman Court has been willing to recognise the rights of a foreign officeholder appointed over a Cayman Islands company to act on behalf of the company in the Cayman Islands are very limited. It is therefore usually necessary for parallel insolvency proceedings to be commenced in the Cayman Islands in order to obtain the benefits of any insolvency protection.
However, the Cayman Court is willing to co-operate and co-ordinate with foreign courts and officeholders in order to effect an orderly restructuring or winding up. For example, the Cayman Court frequently appoints Cayman Islands provisional liquidators on a "light touch" basis (see question 8) in order to support foreign restructuring proceedings. Additionally, the Cayman Islands has enacted legislation to provide for Cayman liquidators to enter into protocols with foreign officeholders for the purpose of promoting the orderly administration of the estate and avoid duplication and conflict between the foreign and Cayman officeholders. The legislation provides that Cayman liquidators have a duty to consider whether it is appropriate to enter into such a protocol.
The UNCITRAL Model Law on Cross Border Insolvency has not been adopted in China so far, but as the globalization spreads and against the background of China’s intensified efforts to propel the “Belt and Road” initiative, China is destined to make a difference in cross-border insolvency.
The positive conditions for China to recognize and enforce a foreign judgment or ruling on a bankruptcy case are as follows: such judgment or ruling must be final and legally effective and involve assets located in China and requiring the enforcement by a Chinese court; recognition of the foreign judgment or ruling must be based on an international treaty that both the foreign country and China have entered into or acceded to, or in line with the principle of reciprocity. The negative conditions for the recognition and enforcement are that the judgment or ruling does not violate the basic principles of PRC law, or impair the sovereignty, security or public interest of China or the Chinese creditors’ legal rights and interests.
As a result of Denmark’s opt-out of the EU rules on justice and home affairs, Denmark is outside the Insolvency Directive that concerns mutual recognition of insolvencies in the EU.
However, Denmark recognises based on Directive 2001/24EF and 2009/24EF insolvencies over credit institutions and insurance companies if insolvencies proceedings have been commenced in another EU Member State.
In addition to the above EU directives no express rules apply on recognition of foreign restructuring of insolvency proceedings in Denmark with the exception of the Nordic Bankruptcy Convention, see below.
The Danish Minister of Justice may lay down guidelines for recognition of foreign insolvencies proceedings in Denmark, but so far, the Minister of Justice has not used this power. In case law it is consequently assumed that as long as the Minister of Justice has not laid down guidelines for the recognition of foreign insolvency proceedings, foreign insolvency proceedings do not prevent other creditors from individual creditor action in respect of the debtor’s assets in action.
However, Denmark has acceded to the Nordic Bankruptcy Convention together with Norway, Sweden, Finland and Iceland according to which insolvency or restructuring proceedings against a debtor in one of the Nordic countries mean that the debtor’s assets in the home country of the debtor and in the other Nordic countries are also covered by the insolvency or restructuring proceedings.
Based on the Nordic Bankruptcy Convention the insolvency courts in Denmark will consequently recognise insolvency or restructuring proceedings from the other Nordic countries.
- Has the UNCITRAL Model Law on Cross Border Insolvency or the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments been adopted or is it under consideration in your country?
The UNCITRAL Model Law on Cross Border Insolvency and the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments has not been adopted in Denmark and they are not under consideration in Denmark.
- Companies incorporated in a EU Member State
Regulation (EC) 1346/2000 on insolvency proceedings (Insolvency Regulation) allows insolvency procedures in different EU Member States to be automatically recognized if the company's center of main interests (COMI) is in France. A company's COMI is presumed to be the place of its registered office. Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (Recast) replacing the EC Regulation 1346/2000 provides for the same rules, except that the presumption that COMI is the place of the registered office will not apply if the registered office has been transferred in the preceding three months. The Order n°2017-1519 dated 2 November 2017 and Order n°2018-452 dated 5 June 2018 incorporate this new EU Regulation into French Law.
- Companies incorporated outside an EU Member State
A decision opening insolvency proceedings in a country outside of the European Union would have no effect in France, except after having obtained “exequatur” which is intended to verify that the foreign court had proper jurisdiction, international public policy has been complied with and no fraud has taken place or by virtue of an international treaty.
The opening of insolvency proceedings by a competent court in an EU member state shall be recognized in all other EU member states (Article 19 European Insolvency Regulation 2015/848) to the extent the effects of such recognition violate German public policy (ordre public) (Article 33 EU Regulation 2015/848).
The opening of insolvency proceedings in other states is automatically recognized in Germany without formal proceedings, unless (i) the court of the state opening the proceedings is not competent pursuant to German law or (ii) the recognition leads to results that are obviously incompatible with major principles of German law, particularly basic rights.
The UNCITRAL Model Law on Cross Border Insolvency has not been adopted in Germany and such adoption is currently not under consideration. The standards of German international insolvency law are similar to the standards of European Insolvency Regulation 2015/848 and thus are more liberal than the UNCITRAL rules.
Foreign liquidators may apply for recognition in Bermuda pursuant to Bermuda’s common law and the principles of comity. There are no statutory mechanisms for the recognition of foreign insolvency proceedings or for cross-border cooperation in insolvency or restructurings and Bermuda has not adopted the UNCITRAL Model Law on Cross-Border Insolvency. However, there are numerous examples in case law of the Bermuda court exercising its common law powers to recognise foreign insolvency and restructuring proceedings and to cooperate with courts of foreign jurisdictions, particularly in circumstances where (i) the relevant company is incorporated in Bermuda; (ii) the subject company has assets located in the jurisdiction; (iii) the liquidators seek assistance that would be available to them both under the law of the foreign jurisdiction and under Bermuda law; and (iv) such recognition and cooperation are not contrary to Bermuda public policy.
Guernsey is not a signatory to the UNCITRAL Model Law on Cross-Border Insolvency 1997 and is not a member of the EU (so Regulation (EC) 1346/2000 on Insolvency proceedings (Insolvency Regulation) does not apply). However, the Royal Court has a long history of providing assistance to overseas insolvency office holders in appropriate circumstances.
Recognition can essentially be divided into two types:
Firstly, section 426 of the UK Insolvency Act 1986 has been extended to Guernsey by the Insolvency Act 1986 (Guernsey) Order, 1989. As a result, the Royal Court is able to provide judicial assistance to the courts of England and Wales, Scotland, Northern Ireland, the Isle of Man or Jersey in insolvency matters. The procedure under section 426 involves the office holder applying to the court in their home jurisdiction for an order that the home court sends a letter of request to the Guernsey Court for assistance. Generally the Guernsey Court must comply with the request unless it offends public policy or the outcome is oppressive. In addition, section 426(5) provides the court with the means to apply the insolvency law of either Guernsey or the foreign jurisdiction in relation to similar matters falling within its jurisdiction.
The second type of recognition is under the common law. This is an area that has been subject to substantial development in other jurisdictions in recent decisions, particularly that of the Privy Council in Singularis. However, the broad position, remains that Guernsey will co-operate in foreign insolvency proceedings, particularly where there is a sufficient connection between an office holder, appointed in the jurisdiction where the company is incorporated or individual domiciled, and the company or individual has submitted to the jurisdiction of the court by which the appointment was made. Although the Royal Court still retains discretion under the common law, where there is a sufficient connection the court will typically grant the relief sought albeit the availability of "as if" type relief is tempered so that the Guernsey court cannot grant relief unless it has a common law power to do so.
Regulation (EU) 2015/848 (the “Recast Insolvency Regulation”) is applied in Ireland and provides that where a company has its centre of main interests (COMI) in an EU Member State (except Denmark) the courts of that member state have control of the insolvency process even if the company carries out business elsewhere.
Secondary proceedings or territorial proceedings can be opened concurrently in another EU jurisdiction (except Denmark) in which the company has an establishment (e.g. carries out business and /or has company assets located in that jurisdiction). Territorial proceedings are, in effect, secondary proceedings which are commenced prior to the opening of main insolvency proceedings and may be opened once the requirements of Article 3(2)of the Recast Insolvency Regulation are met. When main insolvency proceedings are opened, territorial insolvency proceedings usually become secondary insolvency proceedings. The effects of secondary insolvency proceedings or territorial insolvency proceedings opened in that other Member State are restricted to the assets of the debtor situated in the territory of such other Member State.
Irrespective of whether the insolvency proceedings are main, secondary or territorial insolvency proceedings, such proceedings will, subject to certain exceptions, be governed by the local insolvency law of the court that has assumed jurisdiction over the insolvency proceedings of the debtor. The courts of all Member States (other than Denmark) must recognise the judgment of the court commencing the main proceedings, which will be given the same effect in the other Member States provided no secondary proceedings or territorial proceedings have been commenced there.
The insolvency practitioner appointed by a court in the Member State which has jurisdiction to commence main proceedings may exercise the powers conferred on it by the laws of that Member State in another Member State (other than Denmark) (such as to remove assets of the debtor from that other Member State). These powers are subject to certain limitations (e.g. the powers are available provided that no insolvency proceedings have been commenced in that other Member State nor any preservation measure to the contrary has been taken there further to a request to commence secondary proceedings in that other Member State where the debtor has assets).
The Recast Insolvency Regulation does not apply in the context of receiverships or schemes of arrangement. In addition, insolvency processes outside the EU are not covered by the Regulation. As such, recognition of these insolvency processes is determined on a case-by-case basis in accordance with conflict-of-law rules. Ireland is not a signatory to the UNCITRAL Model Law and therefore US Chapter 11 bankruptcy proceedings are not automatically recognised.
There are no current plans to adopt the UNCITRAL Model Law in this jurisdiction.
- The Royal Court of Jersey will typically provide assistance to foreign insolvency appointees by operation of Art.49 of the Désastre Law or its inherent jurisdiction.
- Applications for recognition of foreign appointees are predicated on the issuance of a letter of request or letters rogatory from a Court in the appointing jurisdiction. Advance notice of any recognition application should be given to the Viscount save in the most urgent cases, but the Viscount and the Royal Court are typically willing to assist foreign appointees.
Mexico was one of the first countries to adopt the UNCITRAL Model Law on Cross-Border Insolvency. When incorporating the Model Law into the Insolvency Law, Mexico made some adjustments which substantially impair the Model Law’s benefits. For example, Mexico demands reciprocity in the granting of international cooperation; the foreign representative is not entitled to initiate avoidance actions; the recognition of a foreign proceeding of a foreign debtor having an establishment in Mexico, rather than being an expeditious process, is subject to the meeting of commencement standards and the visit stage; and the foreign representative is not entitled to request provisional relief directly to the Mexican bankruptcy courts.
Mexico has not adopted the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments.
The Insolvency Act considers foreign insolvency proceedings as secondary proceedings, that is, it recognizes a main insolvency proceeding, which is filed with and processed by the Bankruptcy Authority where the debtor is domiciled, and as many secondary insolvency proceedings as countries are where the debtor owns assets or titles under the bankruptcy regulations applicable in those countries by their competent authorities.
To admit these secondary proceedings, it is necessary that foreign judgments be recognized, a process known as exequatur. These judgments will be enforced only on debtor’s assets located in Peruvian territory.
Where a treaty exists, it will be applied. Peru has signed the following treaties on the matter: the Treaty of Montevideo (1889), the Havana Covenant (1928, a.k.a. Bustamante Code), and the Inter-American Convention on Extraterritorial Validity of Foreign Judgments and Arbitral Awards (1979).
Moreover, the various stages of the secondary insolvency proceeding will be processed in Peru by the Commission of Insolvency Proceedings, such as the publication of insolvency of the debtor in the Official Bulletin of the Peruvian Bankruptcy Authority (INDECOPI), the recognition of creditors’ claims, and the Creditors’ Meetings.
Finally, the UNCITRAL Model Law on Cross Border Insolvency has not been adopted; as a result, the Peruvian Civil Code and the Insolvency Act are the only applicable legislations on this matter.
In Poland, like in other EU countries, concurrent proceedings are automatically recognized and there is also the possibility of commencement of secondary insolvency proceedings, limited to assets located within Poland’s territory.
With regard to other countries, recognition is usually regulated in bilateral agreements, most commonly compliant with UNCITRAL.
Singapore has adopted the UNICITRAL Model Law on Cross Border Insolvency. Under Article 15, an application may be made to the High Court for the recognition of foreign insolvency proceedings. An application must be accompanied by:
a. a certified copy of the decision commencing the foreign proceeding and appointing the foreign representative;
b. a certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or
c. in the absence of evidence mentioned in sub paragraphs (a) and (b), any other evidence acceptable to the Court of the existence of the foreign proceeding and of the appointment of the foreign representative.
An application must also contain a statement identifying all foreign proceedings and proceedings under Singapore insolvency law in respect of the debtor that are known to the foreign representative, and should also provide English translations of all documents provided in support of the application.
However, applicants should take note that the public policy exception under Article 6 has been modified, such that the threshold for rejecting an application is lower than that of other Model Law adopters. It remains to be seen what factors would trigger the modified Article 6.
At present, Singapore has yet to recognise the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments (“MLIRJ”). Given that it is still early days since the introduction of the MLIRJ, it will likely be some time before Singapore adopts the same.
Singapore is also a founding member of the Judicial Insolvency Network, which aims to promote greater cooperation amongst insolvency judges, and to develop best practices for cross border insolvencies. As part of this initiative, the Judicial Insolvency Network is exploring the possibility of having insolvency hearings live-streamed across multiple jurisdictions to allow greater cooperation between insolvency courts.
Sweden is a party to the EU Insolvency Regulation which governs recognition of foreign insolvency regimes in Europe. As a result, insolvency proceedings opened in other member states will also be recognized in Sweden.
In relation to the Nordic countries, Sweden has also acceded the Nordic Insolvency Treaty together with Norway, Denmark, Finland and Iceland, and thus recognize insolvency proceedings opened in those jurisdictions.
European and Nordic insolvencies are recognized without any specific formal procedure.
The UNCITRAL Model Law on Cross Border Insolvency has not been adopted by Sweden.
Swiss insolvency proceedings are intended to apply universally for local debtors (i.e., debtors incorporated in Switzerland). Swiss authorities would, thus, not recognize and give effect to any foreign main insolvency proceedings opened against a Swiss corporate debtor outside of Switzerland. In particular, it should be noted that Switzerland is not an EU Member State and, thus, the centre of main interest (COMI) principle laid down in EU Regulation 2015/848 on insolvency proceedings is not applicable to debtors incorporated in Switzerland. That said, certain foreign restructuring proceedings (including, at least prior to Brexit, a UK scheme of arrangement) may not be viewed as insolvency type of proceedings from a Swiss perspective but rather as court rulings or contractual matters where recognition may be available. This will have to be looked at on a case by case basis.
Switzerland has not adopted the UNCITRAL Model Law on Cross Border Insolvency and the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments and it is neither under consideration to do so. However, Swiss international insolvency laws have been amended with effect as of 1 January 2019 in a bid to facilitate cross-border insolvencies by lowering the previously strict requirements for recognition of foreign insolvency proceedings in Switzerland (cf. section 17 below).
The Spanish legal system recognizes sentences that come from others countries. However, the proceeding to recognize foreign sentences is different according with the origin country.
Sentences that come from UE countries:
- The Regulation (EU) 2015/848 of the European Parliament and of the Council, of 20 May 2015, on insolvency proceedings (“RIP”) establishes in the articles 19, 20 and 32 that any judgment initiating insolvency proceedings handed down by a court of a member state which has jurisdiction according with article 3 of the Regulation, shall be recognized in all other member states from the moment that it becomes effective in the State of the opening of proceedings. In addition, these judgements shall, with no further formalities, produce the same effects in any other member state as under the law of the state of the opening of proceedings, unless this Regulation provides otherwise and as long as no proceedings referred to in article 3.2 of RIP (When the interest center of the debtor is situated within the territory of a member state, the courts of another member state shall have jurisdiction to open insolvency proceedings against that debtor only if it possesses an establishment within the territory of that other member state) are opened in that other member state. Any restriction of creditors' rights, in particular a stay or discharge, shall produce effects vis-à-vis assets situated within the territory of another member state only in case of those creditors who have given their consent. Furthermore, the resolution concerning of insolvency proceedings, and compositions approved by that court, also shall be recognized with no further formalities.
Sentences that come from to member states :
- First of all, it is necessary to check if the countries involved in the sentence are part to a convention.
- Secondly, in case that the affected countries did not agree a convention, it will be necessary the application of the rule of the reciprocity. By this rule, if the affected country recognizes the other´s country national sentences, the counterparty will recognize the foreign sentences in reciprocity.
- Finally, if the affected countries do not accomplish the previous requirements, this sentence will be subject to the proceeding of the exequatur in order to be recognized. This proceeding is regulated in art 951-958 of the Spanish Civil procedure Act and article 220 of SIA. The proceeding of exequatur, consists of a procedure in which the interested person has to file an application to recognition a sentence to the commercial court, that is to say, the judge competent to know the sentence related to the insolvency proceedings. The court will notify Crown Prosecute services and the affected persons in the country where they are established, in order to inform them that there is a subject interested in executing the sentence. At last, the judge shall decide recognize or not the sentence. This resolution is subjected to be appealed to Provincial Court.
Lastly, RIP has been implemented in Spain, as we have indicated in the proceeding of recognition of sentence between UE’s countries. The CNUDM has been also implemented in Spain and as consequently, some Acts have been amended in order to be suited to it, for example the Spanish Arbitration Act.
Yes, a bankruptcy court will recognize a concurrent foreign restructuring or insolvency proceeding over a local debtor which is the subject of such foreign proceeding so long as the foreign representative satisfies the recognition requirements of chapter 15 of the Code. Chapter 15 is based upon the UNCITRAL Model Law on Cross Border Insolvency.
A foreign representative commences a chapter 15 case by filing a petition for recognition of the foreign proceeding under section 1515 of the Code in the U.S. bankruptcy court. The petition must be accompanied by certain documentary evidence which the bankruptcy court is entitled to presume is subject to section 1506 (regarding public policy exceptions). The bankruptcy court must grant recognition of the foreign proceeding if it finds, after notice and a hearing, that the foreign representative has satisfied the requirements of section 1517.
Although recognition of a foreign proceeding under chapter 15 is mandatory where the foreign representative satisfies these statutory requirements, U.S. courts have repeatedly held that (i) the recognition process is not a “rubber stamp” exercise, (ii) the foreign representative bears the burden of proof, by the preponderance of the evidence, that each of the recognition requirements has been met, and (iii) even in the absence of any objection, the bankruptcy court must undertake its own jurisdictional analysis and grant or deny recognition under chapter 15 as the facts of each case warrant.
The UK is, currently, party to the Recast European Insolvency Regulation. This regime provides for automatic recognition of certain collective insolvency proceedings in all European Member States. The extent to which that regime - or a bilateral treaty replicating elements of that regime - might apply post-Brexit remains uncertain.
The UK has adopted the UNCITRAL Model Law on Cross Border Insolvency, via the Cross Border Insolvency Regulations 2006. This permits recognition of the foreign proceedings, and assistance for the foreign insolvency officeholder (including a moratorium), upon application to the court - usually a fairly predictable court procedure. However - critically - such recognition does not necessarily extend to recognition/enforcement of the plan of reorganization with the foreign proceedings. In essence:
- If debt (or shareholder rights) compromised under the plan are governed by English law, the English court will only recognize/enforce the compromise in respect of creditors(/shareholders) subject to the foreign proceedings – owing to the so-called “rule in Gibbs”.
- For these purposes, creditors will be subject to the foreign proceedings if they were present in the foreign jurisdiction when the proceedings commenced, submitted a proof of debt or voted in the proceedings (among other things).
- A parallel UK process may therefore be required to compromise the English law debt, if not all creditors are subject to the foreign proceedings and if parties require certainty.
We understand the UK is likely to adopt the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments in due course, to address the above concerns.
As a member of the European Union, Hungary also applies the 2015/848 Regulation of the Council on insolvency proceedings (the “Regulation”). If the centre of the debtor's main interests is situated within the territory of a Member State, the courts of another Member State shall have jurisdiction to open insolvency proceedings against that debtor only if it possesses an establishment within the territory of that other Member State. The effects of those proceedings shall be restricted to the assets of the debtor situated in the territory of the latter Member State. Where main insolvency proceedings have been opened by a court of a Member State and recognised in another Member State, a court of that other Member State which has jurisdiction may open secondary insolvency proceedings in accordance with the provisions set out in this Chapter. Where the main insolvency proceedings require that the debtor be insolvent, the debtor's insolvency shall not be re-examined in the Member State in which secondary insolvency proceedings may be opened. The effects of secondary insolvency proceedings shall be restricted to the assets of the debtor situated within the territory of the Member State in which those proceedings have been opened.
Pursuant to Regulation (EC) 2015/848 of 20 May 2015 on insolvency proceedings, the courts of the Member State within the territory of which the centre of the debtor's main interests (“COMI”) is situated shall have jurisdiction to open insolvency proceedings (‘main insolvency proceedings’).
Where the COMI is situated within the territory of a Member State, the courts of another Member State shall have jurisdiction to open territorial insolvency proceedings against that debtor only if it possesses an establishment within the territory of that other Member State. The effects of those proceedings shall be restricted to the assets of the debtor situated in the territory of the latter Member State.
Any judgment opening insolvency proceedings handed down by a court of a Member State which has jurisdiction shall be recognised in Belgium from the moment that it becomes effective in the Member State of the opening of proceedings without the need for separate exequatur proceedings.
Foreign insolvency court decisions not covered by the Regulation (EC) 2015/848 may require separate exequatur proceedings in order to be recognized in Belgium.
Belgium has signed but did not ratify the UNCITRAL Model Law on cross-border insolvency. There are no plans for its ratification in the near future.